The first mill was built in Bucoda in 1857 by Aaron Webster. It was purchased in 1902 by a consortium of Martin Foard, Frank R. Stokes, W.W. Whipple and F.D. Butzer, who founded the Mutual Lumber Company. The company produced 120,000 board-feet of lumber per day, but the mill burned down in 1912. Mutual Lumber moved its operation to Tenino until 1919, when it rebuilt the operation in Bucoda. By 1922, the town was dubbed "the little town with the million-dollar payroll" due to Mutual production, which built a hotel and housing for its workers. The last log was sawed in Bucoda in 1944.

Bucoda is on the Skookumchuck River, 18 miles south of Olympia, in south central Thurston County. It was named Seatco in 1873 by Northern Pacific Railway officials. This Indian name means ghost or devil. In 1890, the Territorial Legislature changed it to the present name. Bucoda is a combination of the first 2 letters in the last names of 3 men: James M. Buckley, division superintendent of Northern Pacific Railway; Samuel Colter, a coal mine promoter; and John D. David, a capitalist from Portland, Oregon.